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V1676-17 29 June 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

VAT treatment on land transfers and reverse charge mechanism in construction projects

A property developer has requested a ruling regarding the VAT treatment of transferring a share of land in exchange for the construction of residential and hotel projects. The DGT examines the exemption for land, the identification of the developer, and the application of the reverse charge mechanism.

The question raised

1st. Tax treatment under Value Added Tax regarding the transfer of the properties.

The DGT's ruling

The transfer of land is exempt if it is rural or non-buildable, but it shall be subject to tax if material urbanization works have commenced or if they are building plots. In construction works, the reverse charge mechanism applies when the recipient is an entrepreneur and the contract is between a developer and a contractor. The status of developer requires holding title to the work. In cases of joint ownership, the community of property is the taxable person if it acts as an economic unit with joint risk and venture.

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